Qantas idea of level playing field
 

Just reading on SMH (https://www.smh.com.au/national/coro...30-p54fg5.html ) that

Qantas has told the Morrison government it expects a $4.2 billion loan to "level the playing field" if it bails out smaller rival Virgin Australia with a $1.4 billion coronavirus rescue package, The Sydney Morning Herald and The Age's Patrick Hatch reports.

Im curious on how wanting 3 times the amount would create a 'level playing field'

It made my blood boil. They have said they don't even want the money. They only want it if VA gets some. If they want taxpayer dollars, then sink both of them with a pile of equity that wipes out existing s/holders. Let them be nationalised and then let the government sell them at some point in the future.

Maybe they want it to be level vertically rather than horizontally?

horrible company.

QF's rationale, rightly or wrongly, is that VA is 90% owned by foreign airlines and a British billionaire, while QF has majority Australian ownership. They want 3x the loan guarantee based on having 3x the size of VA (presumably by revenue). QF did raise $1b recently by financing a few planes that they owned outright -- something that VA cannot do as they have never owned planes :)

QF's rationale is that it knows it's lobbing in a political hot potato asking for billions of taxpayer dollars on the basis that VA is getting a handout, and could force the government's hand to let VA fail. Watch QF's tune change if the government offers to take equity in VA.

Hopefully the Govt. will assess the Virgin request based on its merits and tell Qantas to go to hell , given that it doesn't need any funds

Qantas should issue refunds to their customers before they cry poor. Greedy .......s

QF ownership is restricted under the sale act, virgin has no such restrictions. QF would like access to the cheap, low risk loan the govt will provide virgin, understandable in a dupoloy, even if lopsided..

QF was rejected previously in 2014 when it went cap in hand to the government, and rightly so.

Given Virgin Australia is a foreign company it is not up to the Aust Government to bail it out despite it being an essential service and competitor to QF.

The govt should wait to it fails and go and buy it off the receiver, with no debt if the free market fails to buy it from the receiver. Or alternatively insist that all the loans from its foreign owners be turned to equity before it bails it out so that the taxpayer gets its funds back by loan repayment or equity placement long before the foreign owners get their loans paid back from the 10 years of mismanagement under Borghetti.

As a taxpayer I’m not interest in bailing it out only for foreigners to be the beneficiary.

it isn't foreign owners that would be the only beneficiary - a monopoly for flights in Australia would be a real negative for Australians wanting to travel. Before airlines like Virgin came along and Ansett and Qantas ran a nice little cartel operation - fares were not nearly as good as they are now. one way fares were expensive - round trip tickets for travel < 14 days or without a saturday stay were expensive

Im sure Qantas would be very happy to have a monopoly and charge fares accordingly

It’s very much in the interest of the travelling public for VA to survive. Without VA as competition, would we have such substantial lounges (basic (QP), reasonable (J) and private (CL)); would fares be as they are now or much higher; would cabin service be better or worse than now (think for e.g. free alcohol in arvo’s); would QF try to romance us by extending status; would there be status or any status benefits at all; and so on ..

Surely this would draw intense scrutiny of their pricing, through, wouldn't it? How can a monopoly actually be good for Qantas in the long-run?

Edit: I would also think a monopoly in Australia brings renewed scrutiny of their joint venture with AA.

Government should be the investor of last resort, once all commercial options have been exhausted. As as investor of last resort it'll be able to get very attractive terms for taxpayers. Therefore foreign shareholders wont be bailed out - the government will(should) subscribe for equity on very attractive terms and massively dilute existing shareholders(foreign or otherwise).

If the boards of Virgin and QF dont accept then fine, the companies will go bankrupt and then start again under new owners - the underlying airlines will continue, just with different owners(yes the government likely to have to nationalise/otherwise step in to ensure essential flights & jobs continue to run while this takes place but its not impossible - other governments across the world have done this previously i..e the banks in the GFC)

Totally agree the role of government is the last resort investor to ensure public policy benefits of competition are available. I totally agree we need two airlines and the public policy benefits of that.

However whilst the current mix of owners, being the other airlines and Branson, still have the loans (not equity) owing to them from VA the government should not invest either as a loan or a loan with future equity. My fear is VA will be a long way from every declaring a dividend so if the taxpayer ends up with a likely equity stake the Shareholder loans will be paid back long before the taxpayers equity gets much uplift in value. VA is weighed down by these shareholder loans and these loans will be repaid, in essence, from future earnings before a dividend is paid on future earnings.

Let the free market find a solution and the government be prepared to step in if the free market cannot ie during the Receivership phase after the loans are written off.

A better investment option (not policy) would be for SQ to do a full takeover on the cheap and play the long game - get the money from the Singaporean Government if they need to sure up feeder traffic to Changai and the SQ network. That would provide a great competitor to Qantas, benefits to Singapore State and SQ itself.

SQ used to own Tigerair in Oz before VA bought it from them, so they have done a foray into Oz already and took their money out. VA does seem to have been structured financially to maximize benefits to its owners, rather than for success as an Australian airline, imho. Lots of dubious transactions over the past decade, making the airline financially fragile when that was easily avoidable.

Would also provide SQ with its coveted Australia-US service.

Regards,

BD